The

dissatisfied with a stock which has declined in market price. We are making every effort to constantly improve the company's prospects and accomplishments and thereby increase the value of the investment of our stockholders. SBIC industry has many problems, some legislative and regulatory, and some operational, and these are recognized by the industry and the SBA. If you have read the published reports of the major SBIC's, you know that, like other lenders and investors, SBIC's have had some disappointing investments and some losses as well as some gains, and the future of the industry may yet be in the balance. If there is a time and an opportunity when total or partial liquidation or merger of Gulf-Southwest would be in the best interest of its stockholders, you can be sure that your directors will promptly recommend such action. Any such action would clearly have to be in the best interest of our stockholders, as Gulf-Southwest is a Texas corporation and under Texas law the affirmative vote of 80 percent of its outstanding shares would be required for merger or dissolution.

We appreciate the confidence which the overwhelming majority of our shareholders has expressed in our management for the past 2 years, and we shall continue to make every effort to deserve and justify such confidence.

Soon after we close our fiscal year on March 31, 1964, you will receive the complete annual report of Gulf-Southwest's operations.

Attached to this letter is certain information concerning the directors of Gulf-Southwest.

1 Includes 31,600 shares owned by Houston Corp., 47 percent owned by Mr. Butler.

2 500 shares more acquired Jan. 14, 1964.

For information as to additional shares of Gulf-Southwest owned by members of families of directors, see pp. 2 and 3 of the accompanying letter.

Mr. MITCHELL. Mr. Chairman, along with Mr. Moore's suggestion, I have here a letter to the general counsel of the committee from the president of Gulf-Southwest declining the opportunity to appear, and I would like for it to be received in the record at this time, if possible. The CHAIRMAN. Without objection, it may be received.

(The letter referred to follows:)

GULF-SOUTHWEST CAPITAL CORP.,

March 5, 1964.

Hon. RICHARD L. MITCHELL,

Counsel, Select Committee on Small Business,
House of Representatives, Washington, D.C.

DEAR MR. MITCHELL: I appreciated your call earlier this week and your invitation to Gulf-Southwest to have a representative testify before the committee later this month.

After consideration, we believe that we have no legislative recommendation or proposal to make to your committee and no reason to make any statement to the committee at this time.

Thank you for your courtesy in calling me.
Very truly yours,

A. KNOX TYSON, President.

Mr. MITCHELL. Now, Mr. Puett, you mentioned in your statement, or the copy of a letter of December 14, 1963, that there appeared to be around $7.5 million in cash on hand in this company; is that correct?

Mr. PUETT. That is correct.

Mr. MITCHELL. I believe you indicated in that letter that you hoped that none of that money was spent before something is done toward liquidating this company; is that correct?

Mr. PUETT. That is correct.

Mr. MITCHELL. Now, I believe in your revised schedule 14(d) to the SEC, you submitted the statement that in April 1963, you became concerned about the low market value of this stock; is that not correct? Mr. PUETT. If you are reading from that, I am sure it is.

Mr. MITCHELL. I will read from it. In your answer to item IV of schedule 14 (d) filed with the Securities and Exchange Commission on January 24, 1964, you stated:

In April 1963 I became concerned about the low market value of the stock. Now, also in your letter of December 14 to the stockholders on this matter, Mr. Puett, if I might read from it, you state:

For the past year, various advisory services, stockbrokers, and security analysts have consistently recommended against the purchase of Gulf-Southwest stock. Why? Even at today's terribly depressed price, no recognized authority will recommend that purchase of this stock.

That letter from you to the stockholders was dated December 14, 1963, was it not?

Mr. PUETT. That is correct.

Mr. MITCHELL. Why, Mr. Puett, did you on December 22, 1963, buy 6,900 shares of this stock after this letter?

Mr. PUETT. Because I feel like then, and I feel now, that that company is going to be liquidated, and I think it will liquidate out at about $8 a share, and I could buy the stock for 42 in December.

Mr. MITCHELL. In other words, your purchase of stock in this company was in anticipation of attempting to liquidate it in order to reach its cash and equivalent and what else could be gotten out of it? Mr. PUETT. That, and also I felt like the more of it I owned the better chance I would have to have some say so in the management or the liquidation of it, which I think is going to happen.

Mr. MITCHELL. But then you bought 6,900 shares of stock in it after writing to stockholders to the effect that, in the terribly depressed price condition, no recognized authority would recommend the purchase of the stock at all?

The CHAIRMAN. Mr. Mitchell, do you have further questions?
Mr. MITCHELL. I believe not, sir.

Mr. MOORE. I have a couple of questions I would like to take up with the witness after we come back.

The CHAIRMAN. Would it be possible for you also to make yourself available, Mr. Puett, for further testimony?

Mr. PUETT. I would appreciate if you would let me start at 2 promptly, because I am going to try to get out of here to go home.

The CHAIRMAN. You are most kind, and we will do that. I wanted to ask you if you have information about self-dealings; that, if you have that information and would submit that concerning Gulf-Southwest, we would appreciate it.

Mr. PUETT. Be glad to.

Mr. MOORE. Mr. Chairman. Mr. Puett, you had a list of all SBIC's in the country; you have it in your hand now.

Mr. PUETT. Publicly owned.

Mr. MOORE. Do you have any objection to submitting that for the record as part of your statement?

The CHAIRMAN. If there is no objection, it is received.

(The list referred to follows:)

Vital statistics-Publicly held SCIC's (from SBIC Market Report, March 1964)

See footnotes on p. 53.